Taste Is Tested : O.C. Food, Music Festival Loses Its Nonprofit Status

The annual food and music fete known as Taste of Orange County has lost its tax-exempt status, putting its already slim charitable donations in jeopardy. The Internal Revenue Service, which last summer audited the event’s operations, has revoked Taste’s nonprofit status and disqualified the organization as one to which contributions are deductible.

Created nine years ago as a fund-raiser for charities, Taste of Orange County has evolved into a much different festival, said James Wurster, president of JW Event Group Inc. in Irvine, which produces Taste.

In its first years, it contributed $50,000 annually to local charities. But recently, it has booked live acts like singers James Brown, Merle Haggard and Dick Dale that have ballooned expenses to $2 million, leaving little for donations.

Last year, only $5,000 was donated to charity, Wurster said.

“We want to continue to try to contribute to charity,” he said, “but we’ll now have to pay taxes and use some of the profit to continue the event.”

The IRS wouldn’t explain why it revoked Taste’s tax-exempt status retroactively for two years. Wurster said the federal agency decided that too little was going to charity, and it questioned JW Event’s efforts to launch other festivals.

“In a way, the decision was mutual,” Wurster said. “We told them we were looking to do this anyway. Now I’ve got to see if I can make the thing work out. And I want to see if I can do other projects.”

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The charitable event has become a marketing extravaganza as restaurants sell samples of their cuisine and other businesses set up booths in an effort to promote themselves to the 60,000 to 75,000 patrons over the three-day festival.

Giant retailer Sears, for instance, is a major sponsor for this June’s event, and will showcase its products and services, offering entertainment at its Sears Kids’ Stage that features its home theater technology.

Wurster pointed out that the IRS action should have little impact on Taste of Orange County.

The Southern California Gas Co., for instance, said it will continue to be one of the two co-presenters for this year’s event because it wants to show its community involvement and to reach out to customers, spokeswoman Jeri Love said.

The other co-presenter, The Times Orange County, also will continue to sponsor the event as long as “there is no impropriety involved,” President Bob Magnuson said. “This is an event that’s been very closely associated with Orange County and very popular with people here, and one that we have enjoyed.”

As part of the sponsorship, Wurster has agreed to donate $5,000 from the event to The Times in Education, which provides newspapers and courses for schools.

Cities and civic organizations throughout the country have followed the lead of Chicago, which puts on Taste of Chicago annually, to raise money for a variety of civic and charitable purposes.

The Laguna Niguel Chamber of Commerce, for instance, puts on its Community Expo to promote local businesses. Profits fund college scholarships and other civic and charitable events, chamber spokeswoman Debra Newman said. Her organization has maintained its tax-exempt status for the festivals, she said.

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For Wurster, Taste of Orange County was never a totally charitable event. He sought tax-exempt status in the late 1980s because, he said, only nonprofit organizations could operate outdoor food festivals without adhering to costly state health agency requirements.

But a few years ago, he said, health officials said nonprofits would have to adhere to the same rules as other event organizers. That meant he would have to install such things as fly-netting around booths and wooden flooring in food areas. The change cost Taste “tens of thousands of dollars,” Wurster said.

The state’s decision and the financial strain on the annual event, he said, prompted him to think about turning Taste into a for-profit operation.

But the IRS acted first.